EXCEPTIONAL RETURNS FOR HYPROP SHAREHOLDERS
|•||Dividend up 15,0%|
|•||Total return 59,0%|
|•||Like-for-like NAV up 13,4%|
|•||95% of debt fixed for 5,2 years|
|•||Strong performance from Rosebank Mall|
Leading JSE shopping centre REIT, Hyprop, has continued its formidable track record of strong returns with an exceptional 15% increase in total distributions for the year to 543 cents a share. Shareholders will be paid a dividend of 280,3 cents per share for the second half of the year, an increase of 16,3% on the prior corresponding period. Hyprop’s strategy again proved its resilience with a focus on owning quality shopping centres for middle-to-higher income, consumers delivering a robust performance despite the sluggish economy.
Maintaining its double digit growth in key indicators, total revenue and distributable earnings from investment property increased by 11,9% and 14,5%, respectively. Net asset value (NAV) per share rose 17,1% to R89,04 from R76,02 due mainly to an increase in the portfolio valuation. Hyprop’s closing share price of R121,00 at 30 June 2015 represented a 35,9% premium to NAV.
CEO Pieter Prinsloo says proactive management of the portfolio continues to yield benchmark results. “Ongoing strong demand for retail space in our shopping malls is reflected in our low vacancies of 1.3%”. The retail portfolio comprises 95,6% of total rentable area. Office vacancies dropped significantly to 8,3% from 13,8% as a result of new lettings at the Lakefield Office Park and Canal Walk offices.
He adds that Hyprop’s focus on improving its shopping centre portfolio through reinvestment has paid off. “The redeveloped Rosebank Mall, which re-opened in October 2014, immediately began contributing to the group’s growth in distributions”. The extension to the Woolworths store in Canal Walk is complete and the extension to the Somerset Mall Woolworths store is due for opening in October. Ongoing tenant mix improvements further boosted Hyprop’s performance, such as Hyde Park Corner’s new Cortina Court, which hosts high-end brands like Versace, Longchamp and Armani. Clearwater Mall’s R37 million upgrade and extension is currently underway and set to house leading global fashion brands H&M, River Island and Top Shop.
Hyprop continued to sell off non-core assets and the proceeds enabled the group to reduce net borrowings to R6,6 billion. CapeGate Lifestyle, CapeGate Value Centre and Stoneridge were sold for a total of R833 million. Prinsloo adds that the group has continued its conservative management of debt, with a loan-to-value ratio of 22,9% and 95% of interest rates fixed at 7,1%, for an average 5,2 years.
The healthy progress of its sub-Saharan footprint also helped drive the group’s results. Hyprop’s current investment of R2,3 billion in sub-Saharan Africa includes Accra Mall (Ghana), West Hills Mall (Ghana) and Manda Hill (Zambia). Together they upped their contribution to distributable earnings by 21% year-on-year to R42,4 million. The 13 400m² Achimoto Centre (Ghana) is on track to open in October this year. Prinsloo says R5 billion has been previously approved for investment in sub-Saharan Africa, with Nigeria and Kenya considered as future expansion destinations.
South Africa’s current power challenges have seen Hyprop focus on addressing its own electricity needs and a number of energy-efficient initiatives have already been implemented. “Our portfolio has substantial back-up power and the effect of load shedding has not been material.” Hyprop completed phase 2 of Clearwater Mall’s solar photovoltaic plant in August 2015, which now has a generating capacity of 2,5GWh per annum. The group further installed additional back-up generators at Hyde Park Corner.
Hyprop is forecasting dividend growth of approximately 10% for the year ahead to 30 June 2016. More capital investment has been earmarked for continuous improvements and refurbishments in the year ahead to further unlock value in existing South African centres. Emerging market opportunities look more promising and Hyprop will continue looking at appropriate acquisitions or developments. Prinsloo concludes: “Given the proven success of our strategy, we will continue optimising our existing portfolio and further refinement by disposing of our remaining non-core properties, whilst maintaining our prudent debt management.”
Shares in Hyprop closed yesterday at R124,00.